Published On: Wed, Feb 20th, 2013

Support Level

A Support Level is the lower bound price point of a security in which the price could fall to, without falling further.

As an example, if a stock’s price moves up and down over time, but fails to fall past a certain dollar amount, that share price of the stock will become the Support Level of the stock.  Support Levels are generally known by traders who rely on the technical analysis of securities to time entry and exit points of trades.  These traders will know that a stock has reached a Support Level or lower bound of a trading range.  They will then begin to go long in the stock at this point because the feeling is that soon the price of the stock will reverse with renewed buying interest.  Often times Support Levels are a self fulfilling prophesy as many traders worldwide will go long the security at the Support Level having the effect of pushing the price up, just as they had planned.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.